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State of the Spanish Hotel Industry

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With visitor numbers expected to drop 10% in 2009, the Spanish hotel market is suffering greater year-on-year declines in performance than some of its European neighbors.

 Visitors from major source markets such as Germany, the U.K. and France are in decline, with U.K. travelers further deterred by the 20% weakening of Sterling against the euro during the past 12 months and the increased competition from destinations such as Turkey and Egypt.

According to data compiled by STR Global, decreasing occupancy (-13.5%) at Spanish hotels has led to heavy price cutting (-11.8%), which together have dragged RevPAR down by -23.7%.

“Significant price cuts have failed to stimulate demand”, said Elizabeth Randall, managing director of STR Global. “Until occupancy recovers, it is hard to see from where improvement in Spain will come. It may now take some time to make up the fall in RevPAR, which is amongst the highest in Southern Europe.”

Poor performance compared with international neighbours is one thing, but Spain is also suffering from the impact of the economic crisis on the domestic market.

 The abrupt decline of the real estate industry and an unemployment rate of around 19%, the highest in Europe, make for tough times across the country.

Spain’s two biggest markets, Madrid and Barcelona, may still have higher rates and RevPAR than the national average, but both are in more significant decline. Madrid’s RevPAR through July 2009 has fallen 32% compared to 2008, a rate of decline only exceeded by Moscow amongst Europe’s capital cities.

“Madrid has been working hard on its image as a cultural destination to complement its business reputation,”  Randall explained. “However, our Comprehensive Pipeline Outlook report shows an increased supply of 1,021 rooms over the past 12 months and a further five hotels under construction. This additional supply together with the reduced demand is almost the worst-case scenario. Barcelona has seen a similar decline in RevPAR with a fall of 28.5%. The city’s position will not be improved as the STR Global Comprehensive Pipeline Outlook report shows a further 1,290 rooms under construction, including the 473-room W Barcelona, the second W Hotel in Europe, which will open in October ‘09.”

STR Global’s reach in Spain is significant with more than 730 hotels representing some 123,000 rooms sampled across the country. In line with global hotel performance, select Spanish cities are experiencing contraction across the board, highlighted by the double-digit declines in year-on-year occupancy in all but three cities (Bilbao, Cordoba and Marbella).

 The 59.4% fall in Zaragoza’s RevPAR is dramatic and can only be attributed to the build-up to the International Expo “Water and Sustainable Development”, which took place from June to September 2008.

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